Wednesday, December 21, 2011

Banks back to bankers

Money is our defense against poverty and threat of poverty. Money is the gate to prosperity, luxury and power. Earning, administering and spending money are matters of grave concern for most people. Where appetite for money and appetite for risk-taking combine, we get speculation. Human nature being what it is, we should accept that. Speculators are there, they will stay and they fulfill a function. Like predators in the food chain. Now they act like they own the place. Casino capitalism is the financial system being hijacked (again) by the speculators. Speculators are very clever. And very dumb at the same time. They hunt in flocks, they copy-cat and they live by the day. There is one group of people more money-wise than the speculators: their traders. They get ample bonuses when they gain, they pay nothing when they lose.
There is a simple solution to the public indignation of bonuses and a large part of the volatility of the financial markets: pay bonuses of any size, but pay them in company stock, not in stock options, and pay them in stock that can only be sold after five years, even when people have left the company before. Bank people should become co-owners. Even if bank managers and bank staff owe only a few percent of the stock, all shareholders will know it is in their interest to have good dividends and stock appreciation on the long run. Employee-ownership should go by a foundation managing the stock and giving certificates to the employees. Employees who need cash, can always borrow with the stock as a collateral, but the durability of the stock-ownership will make for a conservative appreciation.
We can trust bankers when they play with their own money, with slow money. Today, the traders and many bankers earn better than the investors and speculators they serve, and certainly much better than the shareholders they are supposed to serve.
When bankers depend on the longer-term value of their stock, we don't need to establish minimum capital requirements. Their own interest will take care of that.
Now regular stock-owning is less attractive tax-wise. So the 'best' people may leave. Let them. They probably go to your competitor. So the knife cuts both ways.

Of course, separation between retail banking and commercial banking is a good thing. And the compulsive overspending of governments has to be bridled. European countries shed crocodile tears about their national sovereignty weakened by a new pact. When you can still decide how you earn your money and what you spend it on, but you are limited in your overspending, is your personal sovereignty affected? Not at all. Only money junkies could complain.

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